The date of the UK budget has been confirmed as 11 March 2020. As this is the first budget of the new government the announcements could contain a number of important measures.

Pension tax deductions

The UK government is reported to be considering collecting more income tax by restricting the ability of certain taxpayers to obtain tax relief for pension contributions. This would work by restricting the pension tax relief to 20%, so higher rate taxpayers would not obtain relief at the higher rates of 40% or 45%. There could however be technical difficulties with introducing such a measure.

Inheritance tax

A group of cross-party MPs has called for a reduction in the rate of inheritance tax which is currently charged at 40%. Also the Office of Tax Simplification has suggested various changes to simplify the operation of the tax. The Chancellor could consider changes to the inheritance tax although this would involve some loss of government revenue.

CGT – Entrepreneur’s relief

The government is reported to be considering reforms to the entrepreneur’s relief which reduces capital gains tax (CGT) to 10% for owners of businesses selling part or all of a business, up to a lifetime maximum of GBP 10 million. The measures was originally intended to encourage business investment by reducing the costs involved in selling or handing down a business on retirement.

The government has suggested that the relief is not working as intended and has already adjusted the relief to ensure that people who are not entrepreneurs cannot claim the relief. One further criticism is that the relief only benefits the largest businesses and the measure could be reformed to target relief to smaller businesses.

National Insurance threshold

The policy programme announced in the Queen’s Speech included an increase in the threshold for payment of national insurance contributions by employees, thereby reducing the burden of national insurance (social security) payments on employees. This measure may be included in the 2020 budget measures.

Mansion tax

The previous Chancellor was considering an additional tax on the most expensive residential properties but this is reported to have now been ruled out by the Prime Minister.

Business rates

A group of business leaders has recently called on the government to reform the business rates, the local tax on businesses based on property. The business leaders complained about regional disparities in the business rates that are a disadvantage for businesses in some regions outside London. Some short term cuts to business rates have already been announced and further changes could follow.

Other business tax measures

The government has already announced that the rate of the Research and Development (R&D) expenditure credit is to be increased from 12% to 13%. Also the Structures and Buildings allowance, the capital allowance for business buildings, is to be increased from 2% to 3%.

The off-payroll labour rules (IR35) are being extended to transfer responsibility from contractors to large and medium companies to determine if the IR35 rules apply in a particular situation.

The digital services tax is also due to take effect from 1 April 2020, in the form of a 2% tax on the revenues of certain large digital groups.